PDZ.L Regulatory News (PDZ)

PRAIRIE MINING LIMITED

2020

ANNUAL REPORT | ROCZNY RAPORT

ABN 23 008 677 852

CORPORATE DIRECTORY | ZBIÓR DANYCH KORPORACYJNYCH

The Company also advises that an Appendix 4G (Key to Disclosures: Corporate Governance Council Principles and Recommendations) and 2020 Corporate Governance Statement have been released today and are also available on the Company's website.

DIRECTORS' REPORT

30 JUNE 2020

The Directors of Prairie Mining Limited present their report on the Consolidated Entity consisting of Prairie Mining Limited ("Company" or "Prairie") and the entities it controlled at the end of, or during, the year ended 30 June 2020 ("Consolidated Entity" or "Group").

OPERATING AND FINANCIAL REVIEW

Operations

Highlights during, and since the end of the financial year include:

· Prairie has now formally commenced with international arbitration claims ("Claim") by serving Notices of Arbitration under both the Energy Charter Treaty and the Australia-Poland Bilateral Investment Treaty ("Treaties") on the Republic of Poland 

➢ The Claim will allege that the Republic of Poland has breached its obligations under the Treaties through its actions to block the development of the Company's Jan Karksi and Debiensko mines in Poland

➢ The Republic of Poland's actions have deprived Prairie the entire value of its investments in Poland

➢ Claim for damages may include but is not limited to the value of Prairie's historic expenditure in developing both the Jan Karski and Debiensko mines, lost profits and damages, which is linked to the net present value of both mines, and accrued interest related to any damages

· Prairie secured A$18 million of litigation funding to pursue its damages Claim against the Polish government

➢ Prairie signed a Litigation Funding Agreement ("LFA") with a subsidiary of London listed Litigation Capital Management Limited ("LCM") to pursue the Claim against the Republic of Poland

➢ The LFA facility is available for immediate draw down and provides funding to cover legal, tribunal and external expert costs and defined operating expenses associated with the Claim

➢ A$18 million was provided as a limited recourse facility, being repayable in the event that the damages award is recovered from the Republic of Poland

· Completed a Share Purchase Plan ("SPP") to raise A$4 million (before costs) for working capital requirements and business development opportunities

· During the year, Prairie continued to identify and assess other suitable business opportunities in the resources sector

Dispute with Polish Government

On 1 July 2020, Prairie announced it had executed a LFA for A$18m (US$12.3m) with LCM Funding UK Limited (a subsidiary of LCM). The facility is available for immediate draw down for Prairie to pursue damages claims in relation to the investment dispute between Prairie and the Polish Government that has arisen out of certain measures taken by Poland in breach of the Treaties.

On 9 September 2020, the Company announced that it has now formally commenced with the Claim by serving the Notices of Arbitration against the Republic of Poland.

Prairie's dispute alleges that the Republic of Poland has breached its obligations under both domestic law and the applicable Treaties through its actions to block the development of the Company's Jan Karksi and Debiensko mines in Poland which effectively deprives Prairie of the entire value of its investments in Poland.

In February 2019, Prairie formally notified the Polish Government that there exists an investment dispute between Prairie and the Polish Government. Prairie's notification called for prompt negotiations with the Government to amicably resolve the dispute and indicated Prairie's right to submit the dispute to international arbitration in the event of the dispute not being resolved amicably. The Company remains open to resolving the dispute with the Polish Government amicably. However, as of the date of this report, no amicable resolution of the dispute has occurred, since the Polish Government has declined to participate in discussions related to the dispute and accordingly the Company has formerly submitted its Claim as discussed above.

The quantum of any Claim for compensation may include, but will not be limited to:

· the value of Prairie's historic expenditure in developing both the Jan Karski and Debiensko mines;

· Lost profits and damages that the Company has suffered as a result of Poland's acts and omissions which have resulted in the expropriation of both the Jan Karski and Debiensko mines, which is linked to the considerable net present value of both mines at the time of Poland's international treaty breaches; and

· Accrued interest related to any damages award and all costs associated with pursuing the Claims to Arbitration.

The Company is not able to make any further comment in relation to the potential quantum of any claim for compensation at this point.

Please refer to ASX announcements dated 26 April 2018, 28 May 2018, 18 January 2019, 13 February 2019, 4 April 2019 and 31 December 2019 for further details regarding the Company's dispute with the Republic of Poland.

Prairie's investment dispute with the Republic of Poland is not unique, with international media widely reporting that the political environment and investment climate in Poland has deteriorated since the change in Government in 2015. As a result, there are a significant number of International arbitration claims being bought against Poland in the natural resources and energy sectors with damages claims ranging from US$120 million to over US$1.3 billion and includes Bluegas NRG Holding (gas), Lumina Copper (copper) and InvEnergy (wind farms).

Background to the Jan Karski Mine

The Jan Karski mine is a large scale semi-soft coking coal project located in the Lublin Coal Basin in south east Poland. The Lublin Coal Basin is an established coal producing province which is well serviced by modern and highly efficient infrastructure, offering the potential for low capital intensity mine development. Jan Karski is situated adjacent to the Bogdanka coal mine which has been in commercial production since 1982 and is the lowest cost hard coal producer in Europe.

Key benefits for the local community and the Lublin and Chelm regions associated with the development, construction and operation of Jan Karski have been recognised as the following:

· creation of 2,000 direct employment positions and 10,000 indirect jobs for the region once operational;

· increasing skills of the workforce through the implementation of International Standard training programmes;

· stimulating the development of education, health services and communications within the region; and

· building a mine that creates new employment for generations to come and career paths for families to remain in the region.

In March 2016, Prairie released the results of a JORC compliant Pre-Feasibility Study ("PFS") for the Jan Karski mine prepared by independent international mining consultancies Golder Associates and Royal HaskoningDHV. The PFS demonstrated the technical viability and robust economics of Jan Karski to be developed as a large scale long life strategic coal supplier. Further details about the PFS are contained in the Company's announcement dated 8 March 2016.

Background to the Debiensko Mine

The Debiensko mine, is a premium hard coking coal project located in the Upper Silesian Coal Basin in the south west of the Republic of Poland. It is approximately 40 km from the city of Katowice and 40 km from the Czech Republic.

Debiensko is bordered by the Knurow-Szczyglowice Mine in the north west and the Budryk Mine in the north east, both owned and operated by Jastrzębska Spółka Węglowa SA ("JSW"), Europe's leading producer of hard coking coal.

The Debiensko mine was historically operated by various Polish mining companies until 2000 when mining operations were terminated due to a major government led restructuring of the coal sector caused by a downturn in global coal prices. In early 2006 New World Resources Plc ("NWR") acquired Debiensko and commenced planning for Debiensko to comply with Polish mining standards, with the aim of accessing and mining hard coking coal seams. In 2008, the Polish Ministry of Environment ("MoE") granted a 50-year mine license for Debiensko.

In October 2016, Prairie acquired Debiensko with a view that a revised development approach would potentially allow for the early mining of profitable premium hard coking coal seams, whilst minimising upfront capital costs.

In March 2017, Prairie released the results of a JORC compliant Scoping Study prepared by independent international mining consultancy Royal HaskoningDHV. The Scoping Study demonstrated the technical viability and robust economics for the fully permitted Debiensko mine to be a large scale, lowest cost and long life premium hard coking coal supplier. Further details of the Scoping Study are contained in the Company's announcement dated 16 March 2017.

Share Purchase Plan

Subsequent to the end of the year, the Company completed a SPP to raise A$4 million before costs for working capital requirements and business development opportunities.

Results of Operations

The net loss of the Consolidated Entity for the year ended 30 June 2020 was $3,307,600 (2019: $3,550,672). Significant items contributing to the current year loss and the substantial differences from the previous financial year include:

(i) Arbitration related costs of $906,036 (2019: nil) relating to preparation of the Claim that was formally served on the Republic of Poland subsequent to the end of the year;

(ii) Exploration and Evaluation expenses of $1,854,827 (2019: $3,319,878), which is attributable to the Group's accounting policy of expensing exploration and evaluation expenditure incurred by the Group subsequent to the acquisition of rights to explore and up to the commencement of a bankable feasibility study for each separate area of interest;

(iii) Non-cash exploration expenditure impairment expense of nil (2019: $2,721,198) was recognised during the in the prior year following the Republic of Poland's actions which the Company believes has breached its obligations under both domestic law and the Treaties through its actions to block the development of the Company's Jan Karksi and Debiensko mines in Poland which which effectively deprives Prairie of the entire value of its investments in Poland;

(iv) Business development expenses of $299,241 (2019: $408,948) which includes expenses in relation to the costs associated with looking for new business opportunities, including execution of the LCM financing facility, and the Group's investor relations activities, including brokerage fees, public relations, digital marketing, travel costs, attendances at conferences and business development consultant costs;

(v) Non-cash share-based payment expense of $163,613 (2019: reversal of $1,599,118) due to incentive securities issued to key management personnel and other key employees and consultants of the Group as part of the long-term incentive plan to reward key management personnel and other key employees and consultants for the long term performance of the Group. The expense/reversal results from the Group's accounting policy of expensing the fair value (determined using an appropriate pricing model) of incentive securities granted on a straight-line basis over the vesting period of the options and rights. The change to an expense in 2020 from a reversal in 2019 is attributable to the forfeiture of 3.1 million unvested performance rights in 2019 following the impairment of exploration and evaluation discussed above. In 2019 it was determined that the performance rights with vesting conditions milestones relating to Debiensko and Jan Karski were unachievable resulting in $3.4 million being reversed from the reserve to profit and loss;

(vi) Revenue of $456,726 (2019: $557,400) consisting of interest income of $60,423 (2019: $203,160) and the receipt of $396,303 (2019: $354,170) of gas and property lease income derived at Debiensko; and

(vii) Other income of nil (2019: $1,945,800) relating to the gain on extinguishment of the contingent consideration in 2019 related to the Karbonia acquisition following the receipt of a final "second instance" decision from the MoE that denied the Mining Concession amendment application at Debiensko which was a condition for Prairie to pay the contingent consideration.

Financial Position

At 30 June 2020, the Company had cash reserves of $2,566,518 (2019: $6,628,371). With the A$18 million LFA facility now in place and the SPP completed subsequent to the end of the, the Company is in a strong financial position to continue with the Claim and business development activities.

At 30 June 2020, the Company had net assets of $3,998,552 (2019: $7,308,588), a decrease of 56% compared with the previous year. This is largely attributable to the decrease in cash and net loss for the year.

Business Strategies and Prospects for Future Financial Years

Prairie's strategy is to create long-term shareholder value. This now includes pursuing the Claim against the Republic of Poland through international arbitration.

As discussed throughout this report, various measures directed against Prairie by the Polish government in breach of Polish and international law with respect to the Company's permitting process and licenses, have blocked Prairie's pathway to any future production from its Polish projects.

To achieve its objective, the Group currently has the following business strategies and prospects:

· Continue to enforce its rights through an established and enforceable legal framework in relation to international arbitration for the investment dispute between Prairie and the Polish Government that has arisen out of certain measures taken by Poland in breach of the Treaties;

· Continue to assess corporate options for Prairie's investments in Poland; and

· Identify and assess other suitable business opportunities in the resources sector.

All of these activities are inherently risky and the Board is unable to provide certainty of the expected results of these activities, or that any or all of these likely activities will be achieved. Furthermore, Prairie will continue to take all necessary actions to pursue the Company's legal rights regarding its investments in Poland, if and as required. The material business risks faced by the Group that could have an effect on the Group's future prospects, and how the Group manages these risks, include the following:

· Litigation risk - All industries, including the mining industry, are subject to legal and arbitration claims. Specifically and subsequent to the end of the year, the Company formally commenced its Claim following lodgement of its notices of arbitration with against the Republic of Poland. Prairie will strongly defend its position and continue to take all relevant actions to pursue its legal rights regarding both the Debiensko and Jan Karski projects. There is however no certainty that the Claim will be successful. If the Claim is unsuccessful, then this may have a material impact on the value of the Company's securities. 

· The Company may be adversely affected by fluctuations in foreign exchange - Current and planned activities are predominantly denominated in Stirling and/or Euros and the Company's ability to fund these activates may be adversely affected if the Australian dollar continues to fall against these currencies. The Company currently does not engage in any hedging or derivative transactions to manage foreign exchange risk. As the Company's operations change, this policy will be reviewed periodically going forward.

· The Company may not successfully acquire new projects - the Company may pursue and assess other new business opportunities in the resources sector. These new business opportunities may take the form of direct project acquisitions, joint ventures, farm-ins, acquisition of tenements/permits, or direct equity participation. The Company's success in its acquisition activities depends on its ability to identify suitable projects, acquire them on acceptable terms, and integrate the projects successfully, which the Company's Board is experienced in doing. However, there can be no guarantee that any proposed acquisition will be completed or be successful. If a proposed acquisition is completed the usual risks associated with a new project and/or business activities will remain.

DIRECTORS

The names and details of the Group's Directors in office at any time during the financial year or since the end of the financial year are:

Directors:

Mr Ian Middlemas Chairman

Mr Benjamin Stoikovich Director and CEO

Ms Carmel Daniele Non-Executive Director

Mr Thomas Todd Non-Executive Director

Mr Mark Pearce Non-Executive Director

Mr Todd Hannigan Alternate Director

Unless otherwise stated, Directors held their office from 1 July 2019 until the date of this report.

CURRENT DIRECTORS AND OFFICERS

Mr Ian Middlemas B.Com, CA

Chairman

Mr Middlemas is a Chartered Accountant, a member of the member of the Australian Institute of Company Directors and holds a Bachelor of Commerce degree. He worked for a large international Chartered Accounting firm before joining the Normandy Mining Group where he was a senior group executive for approximately 10 years. He has had extensive corporate and management experience, and is currently a Director with a number of publicly listed companies in the resources sector.

Mr Middlemas was appointed a Director of the Company on 25 August 2011. During the three year period to the end of the financial year, Mr Middlemas has held directorships in Constellation Resources Limited (November 2017 - present), Apollo Minerals Limited (July 2016 - present), Paringa Resources Limited (October 2013 - present), Berkeley Energia Limited (April 2012 - present), Salt Lake Potash Limited (January 2010 - present), Equatorial Resources Limited (November 2009 - present), Piedmont Lithium Limited (September 2009 - present), Sovereign Metals Limited (July 2006 - present), Odyssey Energy Limited (September 2005 - present) and Cradle Resources Limited (May 2016 - July 2019).

Mr Benjamin Stoikovich B.Eng, M.Eng, M.Sc, CEng, CEnv

Director and CEO

Mr Stoikovich is a mining engineer and professional corporate finance executive. He has extensive experience in the resources sector gained initially as an underground Longwall Coal Mining Engineer with BHP Billiton where he was responsible for underground longwall mine operations and permitting, and more recently as a senior executive within the investment banking sector in London where he gained experience in mergers and acquisitions, debt and off take financing.

He has a Bachelor of Mining Engineering degree from the University of NSW; a Master of Environmental Engineering from the University of Wollongong; and a M.Sc in Mineral Economics from Curtin University. Mr Stoikovich also holds a 1st Class Coal Mine Managers Ticket from the Coal Mine Qualifications Board (NSW, Australia) and is a registered Chartered Engineer (CEng) and Chartered Environmentalist (CEnv) in the United Kingdom. Mr Stoikovich was appointed a Director of the Company on 17 June 2013. During the three year period to the end of the financial year, Mr Stoikovich has not held any other directorships in listed companies.

Ms Carmel Daniele B.Ec, CA

Non-Executive Director

Ms Carmel Daniele is the founder and Chief Investment Officer of CD Capital in London. Ms Daniele has over 20 years of global natural resources investment experience, ten of which was spent with Newmont Mining/Normandy Mining and acquired companies. As a Senior Executive (Corporate Advisory) at Newmont she structured cross-border M&As including the three-way merger between Franco-Nevada, Newmont and Normandy. Post-merger Ms Daniele structured the divestment of various non-core mining assets around the world for the merchant banking arm, Newmont Capital. Ms Daniele started off her career at Deloitte Touche Tohmatsu. Prior to setting up CD Capital in London in 2006, Ms Daniele was an investment advisor to RAB Capital's Special Situations Fund on sourcing and negotiating natural resource private equity investments. Ms Daniele holds a Master of Laws (Corporate & Commercial) and Bachelor of Economics from the University of Adelaide and is a Fellow of the Institute of Chartered Accountants.

Ms Daniele was appointed a Director on 21 September 2015. During the three year period to the end of the financial year, Ms Daniele has not held any other directorships in listed companies.

Mr Thomas Todd B.Sc (Hons), CANon-Executive Director

Mr Todd was the Chief Financial Officer of Aston Resources from 2009 to November 2011. Prior to Aston Resources, Mr Todd was Chief Financial Officer of Custom Mining, where his experience included project acquisition and funding of project development for the Middlemount project to the sale of the company to Macarthur Coal. A graduate of Imperial College, Mr Todd holds a Bachelor of Physics with first class Honours. He was a Chartered Accountant (The Institute of Chartered Accountants in England and Wales) and a graduate of the Australian Institute of Company Directors.

Mr Todd was appointed a Director on 16 September 2014. During the three year period to the end of the financial year, Mr Todd has held a directorship in Paringa Resources Limited (May 2014 - Present).

Mr Mark Pearce B.Bus, CA, FCIS, FFin

Non-Executive Director

Mr Pearce is a Chartered Accountant and is currently a Director of several listed companies that operate in the resources sector. He has had considerable experience in the formation and development of listed resource companies. Mr Pearce is also a Fellow of the Institute of Chartered Secretaries and Administrators and a Fellow of the Financial Services Institute of Australasia.

Mr Pearce was appointed a Director of the Company on 25 August 2011. During the three year period to the end of the financial year, Mr Pearce has held directorships in Constellation Resources Limited (July 2016 - present), Apollo Minerals Limited (July 2016 - present), Salt Lake Potash Limited (August 2014 - present), Equatorial Resources Limited (November 2009 - present), Sovereign Metals Limited (July 2006 - present), Odyssey Energy Limited (September 2005 - August 2020) and Piedmont Lithium Limited (September 2009 - August 2018).

Mr Todd Hannigan B.Eng (Hons)

Alternate Director for Mr Thomas Todd

Mr Hannigan was the Chief Executive Officer of Aston Resources from 2010 to 2011. During this time, the company significantly progressed the Maules Creek project, including upgrades to the project's resources and reserves, completion of all technical and design work for the Definitive Feasibility Study, negotiation of two major project stake sales and joint venture agreements, securement of port and rail access and progression of planning approvals to final stages. Mr Hannigan has worked internationally in the mining and resources sector for over 18 years with Aston Resources, Xstrata Coal, Hanson PLC, BHP Billiton and MIM.

Mr Hannigan was appointed as Alternate for Mr Thomas Todd on 16 September 2014. During the three year period to the end of the financial year, Mr Hannigan has held a directorship in Paringa Resources Limited (May 2014 - Present).

Mr Dylan Browne B.Com, CA, AGIA

Company Secretary

Mr Browne is a Chartered Accountant and Associate Member of the Governance Institute of Australia (Chartered Secretary) who is currently Company Secretary for a number of ASX and European listed companies that operate in the resources sector. He commenced his career at a large international accounting firm and has since been involved with a number of exploration and development companies operating in the resources sector, based in London and Perth, including Apollo Minerals Limited, Berkeley Energia Limited and Papillon Resources Limited. Mr Browne successfully listed Prairie on the Main Board of the London Stock Exchange and the Warsaw Stock Exchange in 2015 and recently oversaw Berkeley's listings on the Main Board LSE and the Madrid, Barcelona, Bilboa and Valencia Stock Exchanges. Mr Browne was appointed Company Secretary of the Company on 25 October 2012.

PRINCIPAL ACTIVITIES

The principal activities of the Group during the financial year consisted of the exploration and development of Debiensko and Jan Karski. No significant change in nature of these activities occurred during the year.

EARNINGS PER SHARE

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Group's operations are subject to various environmental laws and regulations under the relevant government's legislation. Full compliance with these laws and regulations is regarded as a minimum standard for all operations to achieve.

Instances of environmental non-compliance by an operation are identified either by external compliance audits or inspections by relevant government authorities.

There have been no significant known breaches by the Group during the financial year.

DIVIDENDS

No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made (2019: nil).

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There were no significant changes in the state of affairs of the Group during the year other than the following:

(i) On 31 December 2019, Bogdanka announced that the Polish Government had awarded Bogdanka a mining concession for the K6-7 coal deposit in Lublin. The K6-7 deposit had previously formed an integral part of Prairie's Lublin concession at Jan Karski. These actions by the Polish government provide evidence of their breach of Polish law and the Treaties;

(ii) On 31 January 2020, the Company announced Prairie received a favorable judgement from the Polish Administrative Court that found the Ministry of Environment had violated provisions of law in refusing to grant Prairie the Debiensko concession amendment. The court judgement formally revokes the Ministry of Environment's April 2018 decision denying the Debiensko concession amendment, and requires the body to reconsider Prairie's application; and

(iii) On 30 June 2020, the Company signed an A$18 million LFA with LCM to pursue the Claims against the Republic of Poland for breaches of its obligations under the Treaties.

SIGNIFICANT EVENTS AFTER BALANCE DATE

(i) Commenced with the drawdown of the LCM finance facility prior to the submission of the Claim as noted below in point (ii) below;

(ii) On 9 September 2020, the Company announced that it had formally commenced with its international arbitration Claim following serving of its notices of arbitration under the Treaties against the Republic of Poland; and

(iii) On 17 September 2020, the Company completed a SPP to A$4 million (before costs) for working capital requirements and business development opportunities.

Other than as outlined above, at the date of this report, there are no matters or circumstances, which have arisen since 30 June 2020 that have significantly affected or may significantly affect:

· the operations, in financial years subsequent to 30 June 2020, of the Consolidated Entity;

· the results of those operations, in financial years subsequent to 30 June 2020, of the Consolidated Entity; or

· the state of affairs, in financial years subsequent to 30 June 2020, of the Consolidated Entity.

DIRECTORS' INTERESTS

As at the date of this report, the Directors' interests in the securities of the Company are as follows:

Notes:

1 "Ordinary Shares" means fully paid Ordinary Shares in the capital of the Company.

2 "Incentive Options" means an option to subscribe for one Ordinary Share in the capital of the Company.

3 "Performance Rights" means Performance Rights issued by the Company that convert to one Ordinary Share in the capital of the Company upon vesting of various performance conditions.

4 As founder and controller of CD Capital, Ms Daniele has an indirect interest in the Ordinary shares and Options. CD Capital also hold the right to acquire 5,711,804 Ordinary shares through the issue of a $0.46 convertible note (Loan Note 2).

SHARE OPTIONS AND PERFORMANCE RIGHTS

At the date of this report the following Incentive Options and Performance Rights have been issued over unissued Ordinary Shares of the Company:

· 22,388,060 CD Options exercisable at $0.60 each on or before 30 May 2021;

· 6,225,000 Performance Rights with various vesting conditions and expiry dates between 30 September 2020 and 31 December 2020; and

· Convertible loan note with a principal amount of $2,627,430, convertible into 5,711,805 ordinary shares at a conversion price of $0.46 per share with no expiry date ("Loan Note 2").

During the year ended 30 June 2020, no Ordinary Shares have been issued as a result of the exercise/conversion of Incentive Options, CD Options, Performance Rights or Loan Note 2. Subsequent to year end and up until the date of this report, no Ordinary Shares have been issued as a result of the exercise/conversion of CD Options, Performance Rights or Loan Note 2.

INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS

The Constitution of the Company requires the Company, to the extent permitted by law, to indemnify any person who is or has been a Director or officer of the Company or Group for any liability caused as such a Director or officer and any legal costs incurred by a Director or officer in defending an action for any liability caused as such a Director or officer.

During or since the end of the financial year, no amounts have been paid by the Company or Group in relation to the above indemnities.

During the financial year, an annualised insurance premium of $14,308 (2019: $12,300) was paid to provide adequate insurance cover for directors and officers against any potential liability and the associated legal costs of a proceeding.

To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year.

REMUNERATION REPORT (AUDITED)

This Remuneration Report, which forms part of the Directors' Report, sets out information about the remuneration of Key Management Personnel ("KMP") of the Group.

Details of Key Management Personnel

Details of the KMP of the Group during or since the end of the financial year are set out below:

Directors

Mr Ian Middlemas Chairman

Mr Benjamin Stoikovich Director and CEO

Ms Carmel Daniele Non-Executive Director

Mr Thomas Todd Non-Executive Director

Mr Mark Pearce Non-Executive Director

Mr Todd Hannigan Alternate Director

Other KMP

Mr Miroslaw Taras Group Executive - Poland

Mr Simon Kersey Chief Financial Officer

Mr Dylan Browne Company Secretary

Unless otherwise disclosed, the KMP held their position from 1 July 2019 until the date of this report.

Remuneration Policy

The Group's remuneration policy for its KMP has been developed by the Board taking into account the size of the Group, the size of the management team for the Group, the nature and stage of development of the Group's current operations, and market conditions and comparable salary levels for companies of a similar size and operating in similar sectors. In addition to considering the above general factors, the Board has also placed emphasis on the following specific issues in determining the remuneration policy for KMP:

(a) the Group is currently focused on undertaking exploration, appraisal and development activities;

(b) risks associated with small cap resource companies whilst exploring and developing projects; and

(c) other than profit which may be generated from asset sales, the Company does not expect to be undertaking profitable operations until sometime after the commencement of commercial production on any of its projects.

Executive Remuneration

The Group's remuneration policy is to provide a fixed remuneration component and a performance-based component (short term incentive and long term incentive). The Board believes that this remuneration policy is appropriate given the considerations discussed in the section above and is appropriate in aligning executives' objectives with shareholder and business objectives.

Fixed Remuneration

Fixed remuneration consists of base salaries, as well as employer contributions to superannuation funds and other non-cash benefits. Non-cash benefits may include provision of car parking and health care benefits.

Fixed remuneration is reviewed annually by the Board. The process consists of a review of company and individual performance, relevant comparative remuneration externally and internally and, where appropriate, external advice on policies and practices.

Performance Based Remuneration - Short Term Incentive ("STI")

Some executives are entitled to an annual cash incentive payment upon achieving various key performance indicators ("KPI's"), as set by the Board. Having regard to the current size, nature and opportunities of the Company, the Board has determined that these KPI's will include measures such as successful commencement and/or completion of exploration activities (e.g. commencement/completion of exploration programs within budgeted timeframes and costs), establishment of government relationship (e.g. establish and maintain sound working relationships with government and officialdom), development activities (e.g. completion of infrastructure studies and commercial agreements), corporate activities (e.g. recruitment of key personnel and representation of the company at international conferences) and business development activities (e.g. corporate transactions and capital raisings). These measures were chosen as the Board believes they represent the key drivers in the short and medium-term success of the Company's development. On an annual basis, and subsequent to year end, the Board assesses performance against each individual executive's KPI criteria. During the 2020 financial year, no cash incentive (2019: nil) was paid, or is payable, to KMP.

Performance Based Remuneration - Long Term Incentive

The Group has adopted a long-term incentive plan ("LTIP") comprising the grant of Performance Rights and/or Incentive Options to reward KMP and key employees and contractors for long-term performance of the Company. Shareholders approved the renewal of a Performance Rights Plan" (the "Plan") on 17 August 2017.

To achieve its corporate objectives, the Group needs to attract, incentivise, and retain its key employees and contractors. The Board believes that grants of Performance Rights and/or Incentive Options to KMP will provide a useful tool to underpin the Group's employment and engagement strategy.

(i) Performance Rights

The Group has a Plan that provides for the issuance of unlisted Performance Rights which, upon satisfaction of the relevant performance conditions attached to the Performance Rights, will result in the issue of an Ordinary Share for each Performance Right. Performance Rights are issued for no consideration and no amount is payable upon conversion thereof.

The Plan enables the Group to: (a) recruit, incentivise and retain KMP and other key employees and contractors needed to achieve the Group's business objectives; (b) link the reward of key staff with the achievement of strategic goals and the long-term performance of the Group; (c) align the financial interests of participants of the Plan with those of Shareholders; and (d) provide incentives to participants of the Plan to focus on superior performance that creates Shareholder value.

Performance Rights granted under the Plan to eligible participants will be linked to the achievement by the Company of certain performance conditions as determined by the Board from time to time. These performance conditions must be satisfied in order for the Performance Rights to vest. The Performance Rights also vest where there is a change of control of the Company. Upon Performance Rights vesting, Ordinary Shares are automatically issued for no consideration. If a performance condition of a Performance Right is not achieved by the expiry date then the Performance Right will lapse.

During the financial year, 900,000 Performance Rights were granted to certain KMP. 1,100,000 Performance Rights previously granted to KMP were forfeited during the financial year.

(ii) Incentive Options

The Group has also chosen to issue Incentive Options to some KMP and key employees and contractors as part of their remuneration and incentive arrangements in order to attract and retain them and to provide an incentive linked to the performance of the Company.

The Board's policy is to grant Incentive Options to KMP with exercise prices at or above market share price (at the time of agreement). As such, any Incentive Options granted to KMP are generally only of benefit if the KMP performed to the level whereby the value of the Group increased sufficiently to warrant exercising the Incentive Options granted.

Other than service-based vesting conditions (if any), there are generally no additional performance criteria attached to any Incentive Options granted to KMP, as given the speculative nature of the Group's activities and the small management team responsible for its running, it is considered that the performance of the KMP and the performance and value of the Group are closely related.

The Company prohibits executives entering into arrangements to limit their exposure to Incentive Options and Performance Rights granted as part of their remuneration package.

During the financial year, no Incentive Options were granted to KMP and key employees. No Incentive Options were exercised by KMP during the financial year. No Incentive Options previously granted to KMP lapsed during the financial year.

Subsequent to the end of the year and following the LFA with LCM being signed, the Company established a Management Incentive Program ("MIP") which is a LTIP to retain key company personnel who have important historical information and knowledge to contribute towards the Claim. The MIP provides that if the Claim is successful and the Company receives damages proceeds, 6% of these proceeds will be directed to the MIP for distribution to its participants. The MIP requires that each participant must satisfy specific Claim related duties and if they do so, each participant may be entitled to a pre-defined percentage of the proceeds received by the MIP. In this regard, of the 6% of any future Claim proceeds, Mr Stoikovich (or his nominee personal services entity) will be entitled to 30% of the MIP distribution (ie 30% of the 6% Claim proceeds), Mr Kersey (or his nominee personal services entity) will be entitled to 20% of the MIP distribution (ie 20% of the 6% Claim proceeds), Mr Taras will be entitled to 10% of the MIP distribution (ie 10% of the 6% Claim proceeds) and Mr Pearce and Mr Browne will each be entitled to 7.5% of the MIP distribution (ie 7.5% of the 6% Claim proceeds). The remaining 25% of the MIP distribution has been allocated to other key staff who will contribute to the Claim.

Non-Executive Director Remuneration

The Board's policy is for fees to Non-Executive Directors to be no greater than market rates for comparable companies for time, commitment and responsibilities. Given the current size, nature and risks of the Company, Incentive Options may also be used to attract and retain Non-Executive Directors. The Board determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required.

The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders at a General Meeting. Director's fees paid to Non-Executive Directors accrue on a daily basis. Fees for Non-Executive Directors are not linked to the performance of the economic entity. However, to align Directors' interests with shareholder interests, the Directors are encouraged to hold shares in the Company and given the current size, nature and opportunities of the Company, Non-Executive Directors may receive Incentive Options in order to secure and retain their services.

Fees for the Chairman were set at $36,000 per annum (2019: $36,000) (excluding post-employment benefits).

Fees for Non-Executive Directors' were set at $20,000 per annum (2019: $20,000) (excluding post-employment benefits). These fees cover main board activities only. Non-Executive Directors may receive additional remuneration for other services provided to the Company, including but not limited to, membership of committees.

During the 2020 financial year, no Incentive Options or Performance Rights were granted to Non-Executive Directors.

The Company prohibits Non-Executive Directors entering into arrangements to limit their exposure to Incentive Options granted as part of their remuneration package.

Relationship between Remuneration of KMP and Shareholder Wealth

During the Company's exploration and development phases of its business, the Board anticipates that the Company will retain earnings (if any) and other cash resources for the exploration and development of its resource projects. Accordingly, the Company does not currently have a policy with respect to the payment of dividends and returns of capital. Therefore, there was no relationship between the Board's policy for determining, or in relation to, the nature and amount of remuneration of KMP and dividends paid and returns of capital by the Company during the current and previous four financial years.

The Board did not determine, and in relation to, the nature and amount of remuneration of the KMP by reference to changes in the price at which shares in the Company traded between the beginning and end of the current and the previous four financial years. Discretionary annual cash incentive payments are based upon achieving various non-financial key performance indicators as detailed under "Performance Based Remuneration - Short Term Incentive" and are not based on share price or earnings. However, as noted above, certain KMP may receive Incentive Options in the future which generally will be of greater value to KMP if the value of the Company's shares increases sufficiently to warrant exercising the Incentive Options.

Relationship between Remuneration of KMP and Earnings

As discussed above, the Company is currently undertaking exploration and development activities, and does not expect to be undertaking profitable operations (other than by way of material asset sales, none of which is currently planned) until sometime after the successful commercialisation, production and sales of commodities from one or more of its projects. Accordingly, the Board does not consider earnings during the current and previous four financial years when determining, and in relation to, the nature and amount of remuneration of KMP.

Remuneration of Directors and other KMP

Details of the nature and amount of each element of the remuneration of each Director and other KMP of Prairie Mining Limited are as follows:

Notes:

1  During the year Ms Daniele waived her Non-Executive Director remuneration.

2  Company Secretary services are provided through a services agreement with Apollo Group Pty Ltd ("Apollo Group") a company of which Mr Mark Pearce is a Director and beneficial shareholder of. During the year, Apollo Group was paid or is payable A$232,000 (2019: A$240,000) for the provision of serviced office facilities and administrative, accounting, company secretarial and transaction services to the Group.

Options and Performance Rights Granted to KMP

Details of the value of Incentive Options and Performance Rights granted, exercised or lapsed for KMP of the Group during the year ended 30 June 2020 are as follows:

No Incentive Options or Performance Rights were granted as part of remuneration by the Company to KMP of the Group during the financial year.

There were no Incentive Options granted or exercised by any KMP of the Group during the 2020 financial year.

Employment Contracts with Directors and KMP

Mr Stoikovich has an appointment letter dated 21 June 2018, under the terms of which he agrees to serve as a Director of the Company. Mr Stoikovich's appointment letter is terminable, pursuant to the Company's Constitution, by giving the Company notice in writing. Under the updated appointment letter, Mr Stoikovich receives a fixed fee of £25,000 per annum.

During the financial year, Selwyn Capital Limited, a company of which Mr Stoikovich is a director and shareholder, had a consulting agreement with the Company to provide project management and capital raising services (CEO services) related to Debiensko and Jan Karski. Under this agreement, Selwyn Capital Limited ("Selwyn") is paid a fixed annual consultancy fee of £225,000 per annum and an annual incentive payment of up to £100,000 payable upon the successful completion of key project milestones as determined by the Board. In addition, Selwyn, is entitled to receive a payment incentive worth the aggregate fixed yearly directors fees and consultancy fee in the event of a change of control clause being triggered with the Company. The consulting contract can be terminated by either Selwyn or the Company by giving twelve months' notice. No amount is payable to Selwyn in the event of termination of the contract arising from negligence or incompetence in regard to the performance of services specified in the contract. 

Mr Taras, was appointed as Group Executive - Poland on 13 October 2016. He has a consultancy agreement with the Company dated 1 March 2015 and amended effective 1 September 2015, which provides for a consulting fee of PLN22,500 per month for strategic advisory services. The contract may be terminated by either party by giving one months' notice. Mr Taras also receives a fixed Management Board fee for PD Co sp. z o.o. (Jan Karski) of PLN4,400 per month.

Mr Simon Kersey, Chief Financial Officer, is engaged under a consultancy deed with Cheyney Resources Limited ("Cheyney") dated 1 April 2017. The agreement specifies the duties and obligations to be fulfilled by Mr Kersey as the Chief Financial Officer. The Company may terminate the agreement with six months written notice. No amount is payable in the event of termination for material breach of contract, gross misconduct or neglect. Cheyney receives an annual consultancy fee of £160,000 and will be eligible for a cash incentive of up to £50,000 per annum to be paid upon successful completion of KPIs. In addition, Cheyney, will be entitled to receive a payment incentive worth six months of the annual consultancy fee in the event of a change of control clause being triggered with the Company.

Mr Browne, Company Secretary, has a services agreement with the Company to provide corporate and financial services with the Company. Either party may terminate the agreement by giving one month written notice. Under the services agreement, Mr Browne receive cash and/or incentive securities in the Company. Mr Browne is also entitled to receive a fee worth $100,000 in the event of a change of control clause being triggered with the Company.

Loans from Key Management Personnel

No loans were provided to or received from Key Management Personnel during the year ended 30 June 2020 (2019: Nil).

Other Transactions

Apollo Group Pty Ltd, a company of which Mr Mark Pearce is a Director and beneficial shareholder, was paid or is payable $232,000 (2019: $240,000) for the provision of serviced office facilities and administration services. The amount is based on a monthly retainer of $20,000 (2019: $20,000) due and payable in advance, with no fixed term, and is able to be terminated by either party with one month's notice. This item has been recognised as an expense in the Statement of Profit or Loss and other Comprehensive Income. At 30 June 2020, $20,000 (2019: $20,000) was included as a current liability in the Statement of Financial Position.

As founder and controller of CD Capital, Ms Daniele has an interest in 22,388,060 $0.60 CD Options (which may result in the issue of an additional 22,388,060 Ordinary Shares) and an interest in CD Capital to convert Loan Note 2 into 5,711,804 Ordinary shares through the issue of the $0.46 convertible note.

Equity instruments held by KMP

Incentive Option and Performance Right holdings of Key Management Personnel

Notes:

1 Forfeiture of Performance Rights following the performance condition not being achieved prior to the expiry date.

2 As founder and controller of CD Capital, Ms Daniele is deemed to have an interest in the CD Options.

Shareholdings of Key Management Personnel

Notes:

1 As founder and controller of CD Capital, Ms Daniele is deemed to have an interest in the 44,776,120 Ordinary Shares issued to CD Capital on conversion of Loan Note 1 in 2018.

End of Remuneration Report

DIRECTORS' MEETINGS

The number of meetings of Directors held during the year and the number of meetings attended by each Director was as follows:

There were no Board committees during the financial year. The Board as a whole currently performs the functions of an Audit Committee, Risk Committee, Nomination Committee, and Remuneration Committee, however this will be reviewed should the size and nature of the Company's activities change.

NON-AUDIT SERVICES

Non-audit services provided by our auditors, Ernst & Young and related entities, are set out below. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

DIVIDENDS

No dividends have been declared, provided for or paid in respect of the financial year ended 30 June 2020 (2019: nil).

AUDITOR'S INDEPENDENCE DECLARATION

The lead auditor's independence declaration for the year ended 30 June 2020 has been received and can be found on page 18 of the Directors' Report.

Signed in accordance with a resolution of the Directors.

Benjamin Stoikovich

Director

29 September 2020

Forward Looking Statements

This release may include forward-looking statements. These forward-looking statements are based on Prairie's expectations and beliefs concerning future events. Forward looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of Prairie, which could cause actual results to differ materially from such statements. Prairie makes no undertaking to subsequently update or revise the forward-looking statements made in this release, to reflect the circumstances or events after the date of that release.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2020

The above Consolidated Statement of Profit or Loss and other Comprehensive Income should be read in conjunction with the notes in the Annual Report.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2020

The above Consolidated Statement of Financial Position should be read in conjunction with the notes in the Annual Report.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2020

The above Consolidated Statement of Changes in Equity should be read in conjunction with the notes in the Annual Report.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2020

The above Consolidated Statement of Cash Flows should be read in conjunction with the notes in the Annual Report.

- ENDS -